What to know when taking a car loan

Knowing what to expect and what to avoid is key in availing a car loan in Dubai. Read on to know more.

Owning a car in Dubai makes life extremely simple. However, if you don’t have the wherewithal to purchase a car with a down payment, you will need to avail of a car loan. Luckily, Dubai offers several car financing options based on your requirement, whether the car is new or used, and what your income is.

All banks and several finance institutions in Dubai offer car loans, but you must know what to expect from the process and the loan product itself. Here are some steps you must follow when applying for a car loan:

Do your research. You will be spoiled for choice when availing car loans in Dubai, but you must select the one that fits your monthly budget and salary. The Internet will help you sift through various car loans offered by banks in Dubai – just log on to their websites and study their tenure, corresponding interest rates, your eligibility, etc. Note that banks will normally ask you to transfer your salary to them. Also find out whether you satisfy the minimum salary requirement to avail of a car loan.

Find the extras. Find out if the bank offers fixed rates or floating rates of interest, and if it offers free car insurance on availing the loan. Also ask about their policy on extended warranties, sale of the car before repayment and traffic registration norms.

What is your amount and tenure? Based on the price of the car you want to buy and the funds already at your disposal, calculate the maximum amount you need to borrow from the bank. Try and reduce this as much as possible to get reduced EMIs. If you are a businessperson with a variable monthly income, you may have to avail of a loan at a higher interest.

Are there prepayment fees? Most banks will charge a prepayment fee for foreclosing the loan before its tenure is up. This will be about 1% of the loan amount. Similarly, you may be charged processing costs at the start of the loan. This is known as an ‘arrangement fee’ and is specified by most banks. You can pay it separately or have it included into your principal amount.

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